I am using Ubuntu 10.04 with KDE installed as well (so probably time for an upgrade!)
I have this power management issue too.
Normally the system applies "aggressive power save" (switches off display after 1 min) irrespective of what the plasma widget says is in force. Changing the settings in Power Manager makes no difference.
If I update/install new software (using sudo) power management is switched off completely until I log out and back in, so is this a permissions thing?
If I can provide more info I am happy to do so but not sure what would help.

Here is what I did to get it running again:

cd <user_dir>.kde4/share/config
mkdir backup
mv power* backup

Now go to the 'System Settings'->'Startup And Shutdown'->'Service Manager' and start 'Power Managment' service.

I have to also say that this is affecting me in kubuntu 12.04. In previous versions of kubuntu, I would just set the screen to never shut off, but the setting now seem to be blanked out by default in, "configure Energy Saving Setting Settings." So I would only assume that they are not set to do anything for power saving by default, but obviously my screen is blanking out every ten minutes. I'll have to look into this more. The configuration option have obviously changed, and seem to be lacking the control that once had been available. I remember hearing that there would be changes just remove power management profiles. Although, there seems to be basic functionality affected. Oh. By the way, before the power management changes took place immediately, without loging out or rebooting.

I tried to set the, "Dim Display" to the maximum value of 99 minutes. This did not change the screen from blanking. I then enabled the, "Screen Energy saving" to the default( and maximum) of 360 minute, and I did not have the screen blank in a 20 minute test. I didn't logout to make the changes. I just applied them.

The above was set in 'System Settings'->'Power Managment'.

My only concern is I hope this would be long enough when I want to watch a film. As I can't set this higher from the, "System Settings" center.

I haven't checked locally, but have you tried unchecking the "Dim Screen" and "Screen Energy Saving" options entirely?

The only workaround that I have found for this is to check the "Screen Energy Saving" option and set it to something extremely high. Mine is set to the max of 360 minutes. This at least allows me to watch videos online without interruption. Seems that power management never actually gets disabled even if you turn it off. Odd bug.

Okay, please report a bug against Powerdevil on bugs.kde.org - if screen power management is disabled then it should be disabled.

This issue has arisen again on a fresh install of 12.04. The problem seems to be DPMS turning itself on automatically. Sometimes it turns on after only 1 second of inactivity. To get around this issue, I run "xset -dpms" This seems to kill all power management activity. I have it set to blank the screen after 10 minutes....I just left it on for an hour and it didnt blank.